Economic Essay Example | Topics and Well Written Essays - 1500 words - 1

Economic - Essay Example This article was about the slight drop in China’s passenger vehicle sales in February. 2. Introduction Economics is very essential because it affects our life everyday. As a worker and a consumer, we will have to make economic decisions like how to spend our income. Sometimes, the cost of all the goods and services that we need and want to buy is greater than our income. So, we have to analyze the situation and choose among our choices carefully. We make decisions about learning, working, earning and spending. And we can make all these decisions more effectively if we have better understanding of economics. A good way to start understanding economics is by examining how markets work and who participates in them. All these market participants come into the marketplace because they specific goals to satisfy. They have to pursue their self-interests; buyers maximize their incomes while suppliers maximize their profits. These maximizing behaviors are the driving force of market ec onomies. But it is not just about the buyers and the sellers; governments can also affect the individual choices or influence the marketplace in terms of taxes. This paper will try to figure out how markets, specifically the auto markets, work and examine the factors that may affect the decisions of the participants in the auto market. Economic concepts like demand, supply, price and tax will be the primary tool that will be utilized in this paper. 3. Analysis A. Market The term market simply refers to a place or situation where an economic exchange occurs – where a buyer and a seller interact (Schiller 2006, 47). It exists wherever and whenever an exchange takes place. The exchange of money or resources with goods and services is the market transaction. And in every market transaction, there must a buyer and a seller. The buyer represents the demand side because they demand goods and services in exchange with their money while the seller represents the supply side as they wi ll supply goods and services in exchange for the money. In this paper, the market to be examined is the auto market in China and its participants – the buyers of cars and the sellers or the auto makers like General Motors Co, Ford, Toyota and Mazda and the government. B. Demand â€Å"The Chinese lunar new year also bolstered demand for big-ticket items, but the following months could be challenging for automakers† (usa.chinadaily.com 2011, 2). For us to understand such statement, we should have the basic idea of what demand is. Schiller (2006, 48) defined demand as the buyers' willingness and ability to buy specific quantities of a good at alternative prices in a given period of time. It is inversely related to price. This means that the quantity of a good demanded in a given period of time increases as its price falls. This relationship is also referred to as the Law of Demand. In one of our articles, there was a recorded increase in demand for cars between December a nd January brought about by the tax incentives imposed by the government. Tax like sales tax affects the quantity of goods and services that consumers may demand. As it is an addition to the actual price of a good, the higher the tax imposed on the good the lesser quantity of that good the consumers will demand. For this purpose, Table 1 shows the effect of 10 per cent tax imposed on different prices of car. Price of